CHAPTER 13
Statement of Cash Flows
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
*1. Discuss the usefulness and
format of the statement of
cash flows.
1, 2, 3, 4, 5, 6,
7, 8, 9, 15, 16,
17
1, 2, 3
1
1, 2, 3
1A
*2. Prepare a statement of cash
flows using the indirect
method.
10, 11, 12, 13,
14
4, 5, 6, 7
2
4, 5, 6,
7, 8, 9
2A, 3A, 5A,
7A, 9A, 11A
*3. Analyze the statement of
cash flows.
8, 9, 10, 11
3
7, 9
7A, 8A
*4. Prepare a statement of cash
flows using the direct
method.
8, 18, 19, 20,
21
12, 13, 14
10, 11,
12, 13,
4A, 6A, 8A,
10A
*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendices*to the
chapter.
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Distinguish among operating, investing, and financing
activities.
Simple
10–15
2A
Determine cash flow effects of changes in equity accounts.
Simple
10–15
3A
Prepare the operating activities section—indirect method.
Simple
20–30
*4A
Prepare the operating activities section—direct method.
Simple
20–30
5A
Prepare the operating activities section—indirect method.
Simple
20–30
*6A
Prepare the operating activities section—direct method.
Simple
20–30
7A
Prepare a statement of cash flows—indirect method, and
compute free cash flow.
Moderate
40–50
*8A
Prepare a statement of cash flows—direct method, and
compute free cash flow.
Moderate
40–50
9A
Prepare a statement of cash flows—indirect method.
Moderate
40–50
*10A
Prepare a statement of cash flows—direct method.
Moderate
40–50
11A
Prepare a statement of cash flows—indirect method.
Moderate
40–50
WEYGANDT MANAGERIAL ACCOUNTING 7E
CHAPTER 13
STATEMENT OF CASH FLOWS
Number
LO
BT
Difficulty
Time (min.)
BE1
1
AP
Simple
3–5
BE2
1
C
Simple
2–4
BE3
1
AP
Simple
3–5
BE4
2
AP
Simple
4–6
BE5
2
AP
Simple
3–5
BE6
2
AP
Simple
4–6
BE7
2
AN
Moderate
3–5
BE8
3
AN
Simple
2–4
BE9
3
AN
Simple
2–3
BE10
3
AN
Simple
2–3
BE11
3
AN
Simple
4–6
BE12
4
AP
Simple
2–4
BE13
4
AP
Simple
3–5
BE14
4
AP
Moderate
3–5
DI1
1
C
Simple
2–4
DI2
2
AP
Simple
4–6
DI3
3
Simple
4–6
EX1
1
C
Simple
5–7
EX2
1
C
Simple
6–8
EX3
1
AP
Simple
8–10
EX4
2
AP
Simple
5–7
EX5
2
AP
Simple
6–8
EX6
2
AN
Moderate
EX7
AP
Simple
EX8
2
AP
Simple
EX9
AP
Simple
EX10
4
AP
Moderate
6–8
EX11
4
AP
Moderate
6–8
EX12
4
AP
Simple
5–7
EX13
4
AP
Moderate
6–8
STATEMENT OF CASH FLOWS (Continued)
Number
LO
BT
Difficulty
Time (min.)
P1A
1
C
Simple
10–15
P2A
2
AN
Simple
10–15
P3A
2
AP
Simple
20–30
P4A
4
AP
Simple
20–30
P5A
2
AP
Simple
20–30
P6A
4
AP
Simple
20–30
P7A
2, 3
AP, AN
Moderate
40–50
P8A
3, 4
AP, AN
Moderate
40–50
P9A
2
AP
Moderate
40–50
P10A
4
AP
Moderate
40–50
P11A
2
AP
Moderate
40–50
BYP1
1
AN
Simple
15–20
BYP2
3
AP, E
Simple
8–12
BYP3
3
AP, E
Simple
8–12
BYP4
2
AP, E
Moderate
25–30
BYP5
C
Simple
15–20
BYP6
C
Simple
10–15
BYP7
1
AP
Simple
10–15
BYP8
1
E
Simple
10–15
BYP9
E
Simple
15–20
ANSWERS TO QUESTIONS
1. (a) The statement of cash flows reports the cash receipts, cash payments, and net change in cash
resulting from the operating, investing, and financing activities of a company during a
period.
(b) Disagree. The statement of cash flows is required. It is the fourth basic financial statement.
2. The statement of cash flows answers the following questions about cash: (a) Where did the cash
come from during the period? (b) What was the cash used for during the period? and (c) What was
the change in the cash balance during the period?
3. The three types of activities are:
Operating activities include the cash effects of transactions that create revenues and expenses
4. (a) Major inflows of cash in a statement of cash flows include cash from operations; issuance of
debt; collection of loans; issuance of capital stock; sale of investments; and the sale of
property, plant, and equipment.
5. The statement of cash flows presents investing and financing activities so that even noncash
transactions of an investing and financing nature are disclosed in the financial statements. If they
affect financial conditions significantly, the FASB requires that they be disclosed in either a separate
schedule at the bottom of the statement of cash flows or in a separate note or supplementary
schedule to the financial statements.
6. Examples of significant noncash activities are: (1) issuance of stock for assets, (2) conversion of
bonds into common stock, (3) issuance of bonds or notes for assets, and (4) noncash exchanges
of property, plant, and equipment.
7. Comparative balance sheets, a current income statement, and certain transaction data all provide
information necessary for preparation of the statement of cash flows. Comparative balance sheets
8. The advantage of the direct method is that it presents the major categories of cash receipts and
cash payments in a format that is similar to the income statement and familiar to statement users. Its
principal disadvantage is that the necessary data can be expensive and time-consuming to accumulate.
Questions Chapter 13 (Continued)
9. When total cash inflows exceed total cash outflows, the excess is identified as a “net increase in cash”
near the bottom of the statement of cash flows.
10. The indirect method involves converting accrual net income to net cash provided by operating activities.
This is done by starting with accrual net income and adding or subtracting noncash items included
in net income. Examples of adjustments include depreciation and other noncash expenses, gains
and losses on the disposal of noncurrent assets, and changes in the balances of current asset
and current liability accounts from one period to the next.
11. It is necessary to convert accrual-based net income to cash-basis income because the unadjusted
net income includes items that do not provide or use cash. An example would be an increase in
12. A number of factors could have caused an increase in cash despite the net loss. These are (1) high
cash revenues relative to low cash expenses; (2) sales of property, plant, and equipment; (3) sales
of investments; (4) issuance of debt or capital stock, and (5) differences between cash and accrual
accounting, e.g. depreciation.
14. Under the indirect method, depreciation is added back to net income to reconcile net income to net
cash provided by operating activities because depreciation is an expense but not a cash payment.
15. The statement of cash flows is useful because it provides information to the investors, creditors,
and other users about: (1) the company’s ability to generate future cash flows, (2) the company’s ability
to pay dividends and meet obligations, (3) the reasons for the difference between net income and
net cash provided by operating activities, and (4) the cash investing and financing transactions
during the period.
Questions Chapter 13 (Continued)
+ Decrease in accounts receivable
*19.
(a)
Cash receipts from customers = Revenues from sales
– Increase in accounts receivable
*20. Sales revenue ………………………………………………………………………………………….. $2,000,000
Add: Decrease in accounts receivable ………………………………………………………… 200,000
Cash receipts from customers ……………………………………………………………………. $2,200,000
+ Increase in inventory
– Decrease in inventory
+ Decrease in accounts payable
– Increase in accounts payable
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 13-1
(a) Cash inflow from financing activity, $200,000.
(b) Cash outflow from investing activity, $150,000.
BRIEF EXERCISE 13-2
(a) Investing activity. (d) Operating activity.
(b) Investing activity. (e) Financing activity.
(c) Financing activity. (f) Financing activity.
BRIEF EXERCISE 13-3
Cash flows from financing activities
BRIEF EXERCISE 13-4
Net income …………………………………………………. $2,800,000
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense …………………………... $160,000
BRIEF EXERCISE 13-5
Cash flows from operating activities
Net income ………………………………………………….. $280,000
Adjustments to reconcile net income
to net cash provided by operating activities
BRIEF EXERCISE 13-6
Net income …………………………………………………………. $300,000
Adjustments to reconcile net income to net
cash provided by operating activities
BRIEF EXERCISE 13-7
Original cost of equipment sold …………………………... $22,000
Less: Accumulated depreciation …………………………. 5,500
BRIEF EXERCISE 13-8
Free cash flow = $155,793,000 – $132,280,000 – $5,000,000 = $18,513,000
BRIEF EXERCISE 13-9
BRIEF EXERCISE 13–11
Free cash flow is cash provided by operations less capital expenditures and cash
dividends paid. For Morrow Inc. this would be $384,000 ($734,000 – $280,000 –
$70,000). Since it has positive free cash flow that far exceeds its dividend, an
*BRIEF EXERCISE 13–12
+ Decrease in accounts receivable
Receipts from
customers
=
Sales
revenues
– Increase in accounts receivable
*BRIEF EXERCISE 13–13
+ Decrease in income taxes payable
Cash payment
for income taxes
=
Income Tax
Expense
– Increase in income taxes payable
*BRIEF EXERCISE 13–14
+ Increase in prepaid expenses
+ Decrease in accrued expenses payable
– Increase in accrued expenses payable
Cash
payments for
operating
=
Operating
expenses,
excluding
– Decrease in prepaid expenses
and
SOLUTIONS TO DO IT! REVIEW EXERCISES
DO IT! 13-1
1. Financing activity
2. Operating activity
3. Financing activity
4. Investing activity
5. Investing activity
DO IT! 13-2
Cash flows from operating activities
Net income ……………………………………………………. $130,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense ……………………………… $6,000
Amortization expense ……………………………… 2,000
DO IT! 13-3
(a) Free cash flow = $73,700 – $27,000 – $15,000 = $31,700
(b) Cash provided by operating activities fails to take into account that a
company must invest in new plant assets just to maintain the current
SOLUTIONS TO EXERCISES
EXERCISE 13-1
(a) Financing activities.
(b) Noncash investing and financing activities.
(c) Noncash investing and financing activities.
(d) Financing activities.
(e) Investing activities.
(f) Operating activities.
(g) Operating activities.
EXERCISE 13-2
(a)
(b)
(c)
Operating activity.
Noncash investing and
financing activity.
Investing activity.
(i)
(j)
(k)
Operating activity.
Noncash investing and financing
activity.
Investing activity.
EXERCISE 13-3
1. (a) Cash ………………………………………………….. 15,000
Land …………………………………………… 12,000
Gain on Disposal of Plant Assets …. 3,000
(b) The cash receipt ($15,000) is reported in the investing section. The gain
($3,000) is deducted from net income in the operating section.
2. (a) Cash ………………………………………………….. 20,000
Common Stock ……………………………. 20,000
(b) The cash receipt ($20,000) is reported in the financing section.
3. (a) Depreciation Expense ………………………… 17,000
EXERCISE 13-3 (Continued)
4. (a) Salaries and Wages Expense …………………………. 9,000
Cash ………………………………………………………. 9,000
(b) Salaries and wages expense is not reported separately on the
5. (a) Equipment …………………………………………………….. 8,000
Common Stock ………………………………………. 1,000
Paid-in Capital in Excess of Par—
Common Stock …………………………………… 7,000
EXERCISE 13-4
GUTIERREZ COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………………………………….. $225,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense ………………………………. $45,000
EXERCISE 13-5
SCOGGIN INC.
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………………………………. $153,000
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation expense …………………………... $24,000)
Decrease in inventory …………………………... 14,000)
EXERCISE 13-6
HERRICK CORP
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………. $ 77,000)
Adjustments to reconcile net income
to net cash provided by operating
activities
Cash flows from investing activities
Sale of equipment …………………………………….. 12,000*
Construction of equipment ……………………….. (53,000)
*Cost of equipment sold ……………………………. $ 49,000)
*Accumulated depreciation ……………………….. (30,000)
EXERCISE 13-7
(a) ROJAS CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………………………………. $ 22,630)
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense …………………………... $ 5,000 )
Cash flows from investing activities
Sale of land ………………………………………………… 4,900
EXERCISE 13-8
VELO COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………….. $93,000)
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation expense ……………………. $34,000)
Increase in accounts receivable …….. (9,000)
activities …………………………………… (45,000)
Cash flows from financing activities
Issuance of common stock ………………….. 42,000)
Payment of cash dividends ………………….. (35,000)
Redemption of bonds ………………………….. (50,000)
EXERCISE 13-9
(a) RODRIQUEZ CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ……………………………………………. $ 18,300)
Adjustments to reconcile net income
to net cash provided by operating
activities
Cash flows from financing activities
Issuance of common stock ……………………. $ 5,000
Payment of dividends ……………………………. (16,400)
Retirement of bonds ……………………………… (20,000)
Net cash used by financing activities ………… (31,400)
*EXERCISE 13–10
Sales revenue …………………………..……………………… $192,000
Deduct: Increase in accounts receivable …………… 60,000
Cash receipts from customers* ………………….. $132,000
**
Accounts Receivable
Balance, Beginning of year 0
Revenues for the year 192,000
Cash receipts for year 132,000
Balance, End of year 60,000
Payments for the year 55,000
Operating expenses for year 78,000
Balance, End of year 23,000
*EXERCISE 13–11
(a) Cash payments to suppliers
Cost of goods sold ……………………………. $4,852.7 million
Add: Increase in inventory ……………….. 18.1
(b) Cash payments for operating expenses
Operating expenses exclusive
of depreciation ………………………………. $9,470.5 million
*EXERCISE 13–12
Cash flows from operating activities
Cash receipts from
Customers …………………………..……………… $230,000*
Dividend revenue …………………………..……. 18,000*
$248,000*
Less cash payments:
To suppliers for merchandise ………………. 115,000
For salaries and wages ………………………… 53,000
*EXERCISE 13–13
Cash payments for rent
Rent expense …………………………………………….. $ 48,000*
Add: Increase in prepaid rent …………………….. 3,100*
Cash payments for rent ………………………………. $ 51,100*
SOLUTIONS TO PROBLEMS
PROBLEM 13–1A
Transaction
SCF Activity
Affected
Cash Inflow, Outflow,
or No Effect?
(a)
Recorded depreciation
expense on the plant assets.
O
No cash flow effect
(b)
Recorded and paid interest
expense.
O
Cash outflow
(c)
Recorded cash proceeds from
a disposal of plant assets.
I
Cash inflow
(d)
Acquired land by issuing
No cash flow effect
(e)
Paid a cash dividend to preferred
Cash outflow
Paid a cash dividend
to common stockholders.
Cash outflow
Recorded cash sales.
Recorded sales on account.
No cash flow effect
Purchased inventory for cash.
Purchased inventory on account.
No cash flow effect
PROBLEM 13–2A
(a) Net income can be determined by analyzing
the retained earnings account.
Retained earnings beginning of year …………………….. $250,000
Add: Net income (plug) ………………………………………… 75,500*
(b) Cash inflow from the issue of stock was $19,500 ($170,000 – $140,000 –
$10,500).
Common Stock
140,000
10,500
Stock Dividend
170,000
(c) Both of the above activities (issue of common stock and payment of
PROBLEM 13–3A
WHITLOCK COMPANY
Partial Statement of Cash Flows
For the Year Ended November 30, 2017
Cash flows from operating activities
Net income …………………………………………………. $1,650,000
Adjustments to reconcile net income
to net cash provided by operating activities
activities
Depreciation expense ……………………….. $ 70,000
Increase in accounts receivable ……….. (200,000)
*PROBLEM 13–4A
WHITLOCK COMPANY
Partial Statement of Cash Flows
For the Year Ended November 30, 2017
Cash flows from operating activities
Cash receipts from customers …….. $7,500,000 (1)
Less cash payments:
Computations:
(1) Cash receipts from customers
Sales revenue …………………………………………… $7,700,000
(2) Cash payments to suppliers
Cost of goods sold ……………………………………. $4,900,000
Deduct: Decrease in inventory ………………….. 500,000
Cost of purchases …………………………………….. 4,400,000
(3) Cash payments for operating expenses
Operating expenses, exclusive
of depreciation ………………………… $1,080,000*
Add: Increase in prepaid
expenses ……………………………. $150,000
Decrease in accrued
PROBLEM 13–5A
ZUMBRUNN COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income …………………………………………………. $230,000
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense …………………………... $ 60,000
*PROBLEM 13–6A
ZUMBRUNN COMPANY
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers ……… $960,000 (1)
Less cash payments:
(1) Computation of cash receipts from customers
Service revenue ………………………………………………. $970,000
Deduct: Increase in accounts receivable
(2) Computation of cash payments for operating expenses
Operating expenses per income statement ……….. $624,000
(3) Computation of cash payments for income taxes
Income tax expense per income statement ……….. $ 40,000
PROBLEM 13–7A
(a) NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………… $32,000
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense …………………………... $14,500
Cash flows from investing activities
Sale of equipment ………………………………………. 8,500
Cash flows from financing activities
Issuance of common stock …………………………. 4,000
*PROBLEM 13–8A
(a) NOSKER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers …… $226,000 (1)
Less cash payments:
To suppliers ………………………. $173,000 (2)
Computations:
(1) Cash receipts from customers
Sales revenue …………………………..…………….. $242,000
*PROBLEM 13-8A (Continued)
(2) Cash payments to suppliers
Cost of goods sold …………………………..…………… $175,000
Add: Increase in inventory ……………………………. 7,000
Cost of purchases ………………………………………… 182,000
(3) Cash payments for operating expenses
PROBLEM 13–9A
CHENG INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………… $158,900
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense ………………………….. $46,500
Loss on disposal of plant assets ………….. 7,500
Increase in accounts payable……………….. 44,700
Cash flows from investing activities
Sale of plant assets ……………………………………. 1,500
Purchase of investments ……………………………. (29,000)
Net increase in cash ………………………………………….. 32,400
*PROBLEM 13-10A
CHENG INC.
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Cash receipts from customers………….. $332,980 (1)
Less cash payments:
To suppliers ……………………………… $105,410 (2)
For income taxes ………………………. 27,280
Cash flows from investing activities
Sale of plant assets …………………………. 1,500
Purchase of investments………………….. (29,000)
Net increase in cash ……………………………….. 32,400
Cash at beginning of period ……………………. 48,400
Cash at end of period ……………………………… $ 80,800
Computations:
*PROBLEM 13-10A (Continued)
(2) Cash payments to suppliers
Cost of goods sold ………………………………………… $135,460
Add: Increase in inventory …………………………….. 14,650
Cost of purchases …………………………………………. 150,110
PROBLEM 13–11A
ROTHLISBERGER COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net income ………………………………………………….. $ 42,000
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense ……………………………. $42,000
Loss on disposal of equipment ………………. 4,000*
Cash flows from investing activities
Sale of land ………………………………………………….. 25,000
Sale of equipment ………………………………………… 6,000
Purchase of equipment ………………………………… (88,000)
Net cash used by investing activities ……… (57,000)
Cash flows from financing activities
Payment of cash dividends …………………………... (20,000)
BYP 13-1 FINANCIAL REPORTING PROBLEM
(a) Net cash provided by operating activities:
2013 $53,666 million
2012 $50,856 million
(b) The increase in cash and cash equivalents for the year ended September 28,
2013 was $3,513 million, and the increase was $931 million for the year
ended September 29, 2012.
BYP 13-2 COMPARATIVE ANALYSIS PROBLEM
PepsiCo
Coca-Cola
(a)
$9,688 – $2,795 – $3,434 =
$3,459
$10,542 – $2,550 – $4,969 =
$3,023
BYP 13-3 COMPARATIVE ANALYSIS PROBLEM
Amazon
Wal-Mart
(a)
$5,475 – $3,444 – $0 =
$2,031
BYP 13-4 DECISION MAKING ACROSS THE ORGANIZATION
(a) GUTHRIE COMPANY
Statement of Cash Flows
For the Year Ended January 31, 2017
Cash flows from operating activities
Net loss ………………………………………….. $ (30,000)*
Adjustments to reconcile net income
to net cash provided by operating
activities
Cash flows from investing activities
Sale of investment …………………………... 80,000
Purchase of investment …………………… (75,000)
Purchase of fixtures and equipment …. (330,000)
Net cash used by investing
activities ………………………………. (325,000)*
Noncash investing and financing activities
Issuance of note for truck ………………… $ 20,000
BYP 13-4 (Continued)
*Computation of net income (loss)
Sales of merchandise ………………………… $380,000
Interest revenue ………………………………… 6,000
Gain on sale of investment
($80,000 – $75,000) …………………………. 5,000
Total revenues and gains …………….. 391,000
Merchandise purchased …………………….. $258,000
Operating expenses
($160,000 – $55,000) ……………………….. 105,000
(b) From the information given, it appears that from an operating standpoint,
Guthrie Company did not have a superb first year, having suffered a
$30,000 net loss. Mary is correct; the statement of cash flows is not
BYP 13-5 REAL-WORLD FOCUS
(a) Crucial to the SEC’s effectiveness is its enforcement authority. Each
year the SEC brings hundreds of civil enforcement actions against indi-
viduals and companies that break the securities laws. Typical infracti–
ons include insider trading, accounting fraud, and providing false or
misleading information about securities and the companies that issue
them.
(b) The main purposes of these laws can be reduced to two common-sense
notions:
BYP 13-6 REAL-WORLD FOCUS
Answers will vary depending on the company chosen by the student.
BYP 13-7 COMMUNICATION ACTIVITY
MEMO
To: Will Hardin
From: Student
Re: Statement of cash flows
The statement of cash flows provides information about the cash receipts
and cash payments of a firm, classified as operating, investing, and financing
activities. The operating activities section of the company’s statement of cash
flows shows that cash increased by $172,000 as a result of transactions which
BYP 13-8 ETHICS CASE
(a) The stakeholders in this situation are:
Samuel Gunkle, president of Wesley Corporation.
Gerald Rondelli, controller.
The Board of Directors.
The stockholders of Wesley Corporation.
(b) The president’s statement, “We must get that amount above $1 million,”
puts undue pressure on the controller. This statement along with his
statement, “I know you won’t let me down, Gerald,” encourages Gerald
to do something unethical.
BYP 13-9 ALL ABOUT YOU
(a) The article describes three factors that determine how much money
you should set aside. (1) Your willingness to take risk. You need to evaluate
how willing you are to experience wide swings in your financial position.
(2) Your needs. Your need to carefully evaluate your situation and evaluate
the possibility of various events and what the financial implications